The likelihood of Greece exiting the euro zoneover the next 12 to 18 months remains between 50 and 75 percent even after pro-bailout parties that plan to stick to European Union-imposed austerity won a victory in Sunday's elections, analysts at Citigroup Global Markets, the brokerage and securities arm of Citigroup, said on Monday.
Conservative New Democracy won Sunday's election over the radical Syriza party, but it will need the support of the PASOK Socialists to form a government.
“Initial EU reactions welcome the outcome of the election, but make clear there is little room for the new government to change the existing bailout program. With this in mind, our probabilities for Grexit remain unchanged in the range between 50 percent and 75 percent over the next 12 to 18 months,” Citi said in a note to clients.
“While the outcome of the election, and the likely agreement on an ND-led [New Democracy] government has reduced the risk of an exit in the very near term, with the large role of Syriza in Parliament and its power to organize protest against further austerity measures and far reaching structural reforms on the streets, it looks to us unlikely that Greece will be able to fulfil MoU [Memorandum of Understanding] conditions that have been only slightly amended,” it added.
The MoU refers to the terms of Greece’s 130 billion euro ($163.8 billion) bailout.
It states the country must cut its high level of debt through tough spending cuts and cut its budget deficit below 3 percent by 2014.
Reuters quoted German Foreign Minister Guido Westerwelle as saying on Monday the country might be prepared to give Greece a little more time to get its budget deficit below the 3 percent level imposed on members of the single currency.